I Will Never Promote a Straight White Man Again Proter and Gamble

Can Procter & Take chances Find Its Aim Again?

It's been a humbling decade for the consumer products behemothic. Now leaner and more focused, with its third CEO in iii years, can the rex of brands regain its relevance after years of subpar returns?

On the ninth and 10th floors of Procter & Hazard's (PG) Cincinnati headquarters, in a secure expanse that few are permitted to enter, sits the visitor's Retail Innovation Eye. The "I," as information technology'southward known, is slick and highly digital. P&G'due south top executives believe it contains the ingredients of the company'due south coming turnaround.

The centre, which existed at another location for years merely was revamped and moved in 2015, aims to tell P&G's story to its major customers. There are video case studies of disrupters, from Uber to Airbnb. At that place are mocked-upwardly shelves of both P&Thou'south and competitors' products and rooms set upwards to show P&K items in their intended habitats (such as a baby's room with a diaper table in a suburban home and a laundry setup in an flat). One room is being prepared for a feminine-care presentation, with lingerie, pads, and tampons demonstrating various levels of absorbency. This is serious business.

An enormous screen in the first room allows users to click on stories showing how new technologies and marketing strategies are used. Information technology's mesmerizing. But there's something odd: None of the hundreds of examples are P&1000's own innovations. That's by pattern, say its creators, who want visiting customers from the likes of Walmart (WMT) and Target (TGT) to be startled by the pace of alter, and so motility on to learn more about what P&Chiliad is doing to change the consumer business concern. It uses big data to create customized analytics for every customer. The goal: convince people that P&One thousand is modernistic, fresh, and ready to compete in this new and uncertain world.

But the sheer number of disruptive ideas depicted from outfits other than P&1000 underscores the fact that the $78.eight-billion-in-sales company has had so few of them of belatedly. It's unexpected, considering the unparalleled innovation history of P&Yard. Curlicue through the timeline on its website, and you lot'll exist struck by only how many world-changing technologies (beginning toothpaste with fluoride! starting time synthetic detergent!) were hatched there.

The assortment of global brands is unmatched. There are Ivory Soap (1879), Crisco (1912), Tide (1946), Crest (1955), Pampers (1961), Bounce (1972), Dawn (1973), Always (1983), Febreze (1998), and Swiffer (as well 1998), too every bit plenty of brands acquired by P&G (Gillette, Pantene, and others). The company claims it was the first to truly use market enquiry (1920s). And if that'due south not plenty for you, P&G is responsible for conceiving the soap opera as well (1933).

See Procter & Take a chance's Fortune 500 company profile here.

The by is indisputably glorious. As for the present … um, did nosotros mention the past? The visitor renowned for its stable of 21 billion-dollar brands hasn't invented a new x-effigy brand from scratch in a decade. Yes, P&Thousand crossed the billion-dollar threshold with Tide Pods in 2012, simply that was a new delivery system more than a new product.

The drought will terminate, insists David Taylor, P&G's CEO since November. The company is reorganizing its R&D office and moving power to the leaders of product categories rather than leaving it to senior executives far from the marketplace. It is again focusing on breakthrough technologies that tin change people's lives, says chief engineering science officer Kathy Fish, or at the very least, in her words, "wow the client" with memorable experiences. "Nosotros were doing a lot that wasn't adding value for the consumer," she says, "and fifty-fifty worse, that was making information technology difficult for the consumer to shop our shelves."

There are, Taylor contends, promising signs: new products like Tide purclean, a "greener" laundry detergent; Downy Unstopables (sic), which are scented beads for the washer; and Febreze Car freshener. Sure, they're brand extensions, but they all use new technologies—and the latter two take sold some $300 1000000 each in their start year. Those are notable achievements, even at a behemoth like P&G.

Taylor is well-liked and inspires respect, but as an insider, can he shake up P&G'southward sclerotic civilisation? Photograph Courtesy of P&G

Taylor, who is quick to say the transition will accept time, says he wants P&M to regain its "mastery" after years of management turmoil, poor strategic decisions, and a series of unhelpful macroeconomic trends, including a rise dollar, which hurts P&G more many others.

It is no like shooting fish in a barrel task. P&Chiliad sales peaked at $83.7 billion in 2012 before stagnating and and so failing as the company began offloading brands. For 14 of the past 17 quarters, P&G has been losing market share in half or more of its products. Its revenues have lagged analysts' expectations for four of the past five quarters. The company's stock has barely moved, inching up a cumulative 6.5% over the past two years, vs. 23% for rival Colgate and 29% for the Due south&P 500.

Talent has streamed out. Fifty-fifty the return of P&G's prodigal son, A.G. Lafley, as CEO, didn't fix that. Lafley had to come back in 2013 after his handpicked successor, Robert McDonald, left amid intense criticism. The squabbling that led to his ouster has sub­sided, but so, too, has optimism that the company has finally turned the corner. Taylor, 58, a 36-year P&Grand vet who hasn't granted a formal interview until now, acknowledges this. "Until nosotros put upwards numbers," he says, "I don't await anyone to believe annihilation."

Once a global giant stumbles, information technology'southward hard to recover. Just look at HP (HPE), which lost its way and continues to deconstruct itself, or Kodak, Yahoo (YHOO), Sony (SNE), or Sears (SHLD). P&Chiliad certainly faces no mortal threat; it made $7 billion in profits final year, and it's withal a pivotal consumer goods company. But it's struggling to regain its say-so, its burn, the magic that long attracted the brightest marketing, branding, and scientific minds.

Taylor is honest about P&G's challenges and has the trust and back up of his squad. "There'due south not a single person on the leadership team that says we need to maintain the condition quo," he says. Merely it is an immense chore. Tin can a lifer—or anyone, for that thing—rekindle that P&G spark?

C EO succession is a complex, often messy endeavor. Just enquire the lath at Disney, (DIS) which has struggled to place a future replacement for CEO Bob Iger, or those duking it out with 93-year-old Sumner Redstone for command of Viacom (read more nigh that in our feature "Here's What'due south Actually Going on Inside the Fractious Battle for Viacom"). That was not the case at P&Chiliad back in 2009, when Lafley, who had presided over a decade of dramatic innovation and renewal, every bit well as the visitor-doubling $57 billion acquisition of Gillette in 2005, prepared to stride down.

Talent management and succession planning was something that P&G, the ultimate promote-from-within company, considered amid its greatest competitive advantages. One of its biggest trade secrets wasn't a clothes-cleaning engineering or diaper conception, merely its Talent Portfolio, a blue binder that listed pertinent data on every candidate for the top 120 jobs—too as their potential replacements several levels downwardly. In 2009 I got a peek inside that binder as I reported extensively on the carefully calibrated process that elevated then-COO McDonald to succeed Lafley.

But every bit impressive every bit the method was, the upshot was a bust. In fairness, McDonald had the misfortune of taking over during the punishing global recession that followed the financial crisis. Merely he proved to be a divisive leader. And he set up out then many goals that few could grasp the existent priorities. He also lacked a potent chairman, a P&Grand authentication. Lafley served as chairman for just six months before resigning and leaving McDonald to his own devices.

As well many of the decisions during Lafley'due south first tour as CEO—heralded at the time—turned out to have complicated after­effects. The visitor'south emphasis on premium products in North America, such equally Olay's higher-cease pare creams, left it exposed when purchasing power dropped during the financial crunch. Lafley's decision to consolidate more than power in "global business concern units" left long-powerful brand and state managers struggling to apply local insights.

"Innovation" came to mean modest twists on existing items (think Pantene for curly hair, medium-thick hair, Oestrus Shield, and Ice Shine) rather than new ideas. Says Werner Geissler, P&G's former vice chairman: "R&D people were working as well much on cosmetic upgrades as opposed to game-resetting innovations. Head & Shoulders with Apple? Seaweed?" (In case you're wondering, P&Chiliad did sell both versions.)

A.G. Lafley (right, in 2009) oversaw a smooth transition to Robert McDonald but then returned to replace his successor after McDonald struggled. Photograph past Greg Miller

And the seemingly logical motility into developing markets—where the rising middle class meant billions in new consumer spending—proved more volatile than anticipated. Information technology was this move that defined McDonald's tenure: In 2011 he announced that P&G would have 800 million new customers by 2015, primarily in China, Russia, and other newer markets. "The move of the heart of gravity is critical," he said at the fourth dimension.

Information technology never happened. Instead, P&G posted a string of sales and earnings disappointments. The result: a falling stock and unhappy pensioners (whose retirement was paid in stock) who actively campaigned for McDonald's removal. That occurred as activist investor Beak Ackman took a pale and publicly denounced McDonald's leadership. A slow-moving political bureaucracy, it seemed, had lost its fashion.

On May 23, 2013, McDonald suddenly "retired" from P&G. Back came Lafley, then nearly 66. Having remarried and moved to Florida to pursue triathlons and a part-time private disinterestedness gig, he constitute himself again at the company he had left so triumphantly. P&G'due south board believed he was the just person who could dig the company out of its hole. Plainly, P&G'due south blue binder didn't have every bit much pinnacle talent as its heft had implied.

But A.G. two.0 turned out to be more than of a make extension than a breakthrough innovation. This version of the CEO was older and less energetic, one who defined his job more than narrowly than he had the beginning time around. One time an indefatigable traveler who evangelized well-nigh the customer's "first and second moments of truth," Lafley stayed behind the scenes this fourth dimension, using his newfound private equity skills to figure out which brands and categories deserved focus and which should be jettisoned. He announced he would no longer speak on quarterly earnings calls, refused to collaborate with the printing, and, despite the fact that China was ane of the visitor's biggest problem spots, visited there just twice in his 2½ years at the helm. He wasn't even willing to move dorsum to Cincinnati. That meant a P&Thousand jet flew him back to Florida every weekend, at a cost of $512,000 in 2022 alone.

In one case driven by passion, Lafley at present seemed motivated by obligation—as well as, perhaps, a desire to preserve his legacy. Equally he told an audience at UCLA'southward Anderson School of Management in Dec when asked why he came back: "The short answer was duty and unfinished business organization."

Lafley prepare well-nigh, in some cases, undoing deportment he himself had taken years earlier. In 2014, P&G announced information technology would sell what turned out to be 116 of its 166 brands—a housecleaning that included several acquisitions championed past Lafley himself, such as Wella, bought for $7 billion in 2003, and Clairol, for $5 billion in 2001. In 2015, Coty agreed to purchase the two, along with 40-odd others, for $12.5 billion. Duracell, which came with the Gillette purchase in 2005, was sold to Warren Buffett this yr. (The Oracle of Omaha traded his 52 million P&G shares for the battery business, a seeming vote of no confidence in P&G's overall prospects.)

Lafley, and afterwards Taylor, began recalibrating the company's strategy in China. P&G had entered early, in 1988. But it underestimated the growth of Communist china's upper class, focusing instead on the lower- to middle-class market place. Its diapers, for instance, proved vulnerable to higher-finish offerings from Japanese competitors; P&G's market share has fallen nigh five percentage points since 2010, to 37%, according to Euromonitor & Citi Research. Explained Taylor at a recent conference: "We looked at it too much like a developing market place as opposed to the most discerning customers in the earth." P&G is now trying to motility upmarket in Mainland china.

P&G has as well shifted more resource dorsum to North America, where it has a more than ascendant share. And it has become bacteria and less bureaucratic, in office through huge chore cuts—35,000 past the terminate of 2016. P&Thousand has slashed product categories from 15 to 10 to improve focus. Says Jon Moeller, its longtime CFO: "The businesses nosotros are keeping are those where nosotros take a product engineering that makes a consumer deviation—and, almost to a one, daily employ items."

When asked about reversing his own much-lauded strategy, Lafley was unapologetic: Different times require different measures. As he told the audience at the Anderson School (Lafley declined to exist interviewed for this article): "I had ii incredibly interesting opportunities, and they were 180 degrees dissimilar. In 2000 the job was to abound. It was an extension and expansion strategy. When I came back," he said, "I looked at a company that was overextended and overexpanded … Information technology was a totally different situation." Left unsaid was the question of whether 1 strategy might have had anything to practice with the other.

Subsequently only over two years, Lafley concluded he was done, again. He hadn't revived meridian-line growth, merely he had fabricated tough decisions and, he felt, refocused the company. Lafley announced he would move to executive chairman in November 2015—to be replaced every bit CEO past Taylor, so the group president for global beauty, preparation, and health intendance. The board conducted a search simply ended up choosing—again—a lifer carefully groomed past Lafley. (In some other Groundhog Day moment, Lafley announced on June ane that he volition resign equally chairman again on July 1. This time he stayed 8 months rather than half dozen.)

Internally, there was a collective sigh of relief. Taylor, many thought, could provide both stability and a higher level of appointment than the company had experienced of late. Taylor is known as a proficient guy—the type who trusts his lieutenants, inspires people, and bleeds P&1000 blue and white.

He began as a found engineer. But 12 years in, he decided he wanted to work with the brands and started over again from the bottom as an assistant make manager for Pampers—an unusual movement and one that required humility. Says Gary Martin, P&Grand'southward former head of family care, who ran product supply when Taylor was a plant manager: "He was e'er a star. I managed 65,000 people, and every time we rated the most promising people, he was ever No. 1."

Taylor is white, N Carolinian, basketball-loving, churchgoing—straight out of central casting for the P&G executive suite, if not exactly an improvement on the diversity front. He has worked in beauty, grooming, and fabric care on multiple continents, but spent well-nigh of his time in the baby-intendance business. An operations guy rather than a marketer, Taylor won kudos for successfully expanding the paper business concern into Europe and, later, advocating the sale of the pet-care business concern.

Unlike some predecessors, Taylor is said to make people feel comfy. But is feeling comfortable what P&G needs right now? "I find [Taylor] to exist absolutely lovely," says veteran Citigroup (C) annotator Wendy Nicholson. "Merely when you lot talk to him he talks a lot about the high level: 'We care well-nigh the consumer and culture.' Y'all wonder if that makes folks experience better, merely perchance it's not the correct approach."

Taylor says he understands such criticism, but responds, "I'm in a neat position considering I empathise that civilisation." At that place have, of course, been clandestine rebels who entered as seemingly rote visitor men but to boom the china. Intel's (INTC) Andy Grove was the articulate exemplar, and GM'southward (GM) Mary Barra and Microsoft'due south (MSFT) Satya Nardella are attempting similar transformations. Merely and then far, it's difficult to imagine that this hostage red-haired guy with 36 years at the company is a clandestine revolutionary in a plaid jacket.

On eastward matter that'south clear is that Taylor is obsessively committed to Procter & Run a risk. He does non sit on any other boards (he resigned from TRW's in 2015), does non speak to graduation classes, doesn't give interviews (this was his first sit-down with a reporter, and he agreed to it only after information technology became clear that the article would be published whether he cooperated or non), and doesn't go to Davos. He devotes himself to 1 company. "You tin't imagine how many people want to encounter y'all," he says when asked what'southward different about being the primary executive. "But unless they say it'due south of import to Procter & Run a risk, it's non of import to me."

Taylor knows that irresolute the culture requires injecting a new sense of ­urgency. To show he'southward serious, he holds frequent webcasts and boondocks halls and has visited twenty different countries in the by 12 months, including Prc three times. He doesn't proselytize for a new vision. Instead, he says, he offers "straight talk" about what's happening and encourages underlings to use the same arroyo with him. He has said that nothing is off the table when it comes to fixing P&G. (Taylor wouldn't comment on suggestions that P&M be split upward or the rumored acquisition of Church & Dwight, whose brands include Trojan, Arm & Hammer, and Nair; that would be a surprise after so much divestiture.)

His initiatives so far have all been ­sensible—but they are not exactly barn burners. Many involve shedding layers of bureaucracy and empowering people who are closer to their market rather than to headquarters. Taylor is also irresolute the bounty arrangement to have into account employees' local unit and country functioning equally well as global results.

The CEO hates PowerPoint presentations. He uses a simple scorecard: Each product is marked dark-green (good progress), yellow (some issues), or carmine (trouble) compared with its competitors, accompanied by a plan to fix the problems or aggrandize. "I don't want to see fabric care say it's winning confronting other [P&One thousand] categories," he says. "I want to run across what we did against the best competitor."

On the innovation front, CTO Fish, who has been in place since 2014, is reorganizing R&D. Initiatives that cannibalize brands without expanding the overall market are beingness deemphasized. She points to offerings similar the new Oral-B Bluetooth toothbrush, which records your fourth dimension brushed and the parts you've missed, or SK-Ii's Magic Ring, which measures your pare's age, as examples of the render to P&K's technical superiority.

But some outsiders are concerned that may non be as relevant in an era when millennials are enthralled more by value than by top-of-the-line science, by sustainability equally much equally performance. Case in signal: Dollar Shave Club, which since its 2011 founding has sliced out 8% of the razor market place with a cheap but reliable online offering that took P&G by surprise. Says Ali ­Dibadj, an analyst at Sanford Bernstein: P&G is "creating the best technical product, but the consumer wants something emotionally bonding, niche, and customized. The Honest Co. has a bulletin. Practice people argue that it works improve than Tide? No. Practice people observe it attractive to exist attached to that make? That's what these guys don't go."

In response to Dollar Shave Club, P&Thousand's Gillette unit launched its own online offer in 2015—and sued the company for allegedly stealing its intellectual belongings. (A Dollar Shave spokesperson denies whatsoever patent infringement and adds, "We are not intimidated by Gillette's attempts to thwart competition with litigation.")

Illustration by Pawel Nolbert

Where P&G is making undeniable progress is in cutting costs—which began nether McDonald but continues to accelerate. Amazingly, the company was working with vi,000 creative agencies until 2014: By reducing the number by nearly xl%, it has cut its marketing and product spending by $500 million, with more to come.

Now the visitor has another $ten billion cost-reduction plan underway. Much of it will come from an overhaul of the supply chain in Due north America and Europe. Global product supply officer Yannis Skoufalos says he is reworking the organisation as if he is building it from scratch—a awe-inspiring task for a company of P&Grand's size.

Parsimony helps, just nobody, as the quondam line goes, ever cut their manner to greatness. "I don't believe his focus on cutting costs was sufficient," says Melanie Healey, who headed P&G's North America business until 2015. She's speaking near Lafley, but the signal applies to Taylor too. "It needed to be more balanced, early on, with also investing in growing the top line. Both are disquisitional to driving shareholder value."

Needless to say, constant upkeep pruning doesn't exercise a whole lot for morale; either you are cut, or you piece of work more. That may be why people continue to leave P&G. Says ane erstwhile superlative executive who is in touch with many P&One thousand execs: "They're very frightened. They've lost their swagger, their conviction."

Perhaps P&G needed to lose some swagger. The sense of infallibility that comes with success tin exist precisely what allows disrupters to sneak in. And the company—nearly of all Taylor—­understands this is what happened. But will that knowledge make a departure? Says a former top P&Thou executive: "P&G knows how to solve these problems. It has more consumer data than anyone on the planet. Information technology has the tools. It has the ideas. Merely civilisation gets in the way of allowing those ideas to motion forward rapidly."

A version of this article appears in the June 15, 2022 issue of Fortune.

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Source: https://fortune.com/longform/procter-and-gamble-david-taylor-fortune-500/

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